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NHI And Bickford Senior Living Announce 10-Property Partnership

Stocks in this article: NHI

National Health Investors, Inc. (NYSE:NHI) announced today an agreement with Bickford Senior Living (“Bickford”) to combine their ownership in the real estate and operating assets of 10 stabilized assisted living and memory care facilities. Under the arrangement which is expected to close by September 30, 2012, NHI will contribute eight properties and Bickford will contribute two, with NHI owning an 85 percent interest and Bickford owning the remaining 15 percent. Bickford will continue to manage the facilities. Wells Fargo Securities, LLC served as financial advisor to NHI on this transaction.

“This investment is substantially accretive from day one,” said Justin Hutchens, NHI’s President and Chief Executive Officer. “There is inherent appeal in the solid initial cap-rate of 9% and in this portfolio’s potential to outpace the growth of our typical triple-net lease structure. Bickford Senior Living is a premier operator with twenty years of operating experience.”

Mike Eby, Bickford’s President stated, “Our alliance with NHI ensures our relationship with a strong capital partner who truly values the quality of care we provide to our residents and who is committed to our long-term growth plans for the company.”

NHI structured the transaction to be compliant with the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (RIDEA) which permits NHI to receive rent payments through a triple-net lease between the property company and operating company, and will give NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to a Taxable REIT Subsidiary (TRS).

NHI will have the exclusive right to finance and include all future acquisitions and development projects by Bickford into the new business structure. This includes up to eight previously disclosed projects of which three are underway.

Key Transaction Highlights:

  • The transaction is accretive to NHI’s normalized FFO by $0.02 per diluted, common share for the remainder of 2012 and a minimum of $0.08 per diluted, common share in 2013
  • The business structure is comprised of: 10 facilities, 488 units, 88% occupancy and an average age of five years, plus current development of three, 60-unit facilities
  • Facility ownership: two properties contributed by Bickford and eight properties contributed by NHI
  • Locations: Illinois, Indiana, Iowa, Kansas and Michigan

The cash invested by NHI at the transaction closing is $22.5 million and will be drawn on NHI’s revolving credit facility. NHI purchased from Bickford for $36.7 million in 2009 and 2010 the eight facilities being contributed by NHI to the new business structure. There is $19.3 million of secured debt being assumed with an annual interest rate fixed at 4.5% and maturing in November 2013. The 10 stabilized facilities comprising the new business structure have 2012 annualized net operating income (NOI) of $8.0 million after a 5% management fee to the operator and $500 per unit of capital expenditures.

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